If you are the heir to a borrower who has a reverse mortgage who has passed, here are the steps we recommend you follow:
Time to Payoff Reverse Mortgage
Generally you will have up to 6 months to refinance the reverse mortgage into a loan of your own, or up to 12 months to sell. (Each 3 months requires an extension by the loan servicer.)
Locate the last reverse mortgage statement. We have guidance here for how you can read the statement, so you know what you are dealing with.
Contact an elder real estate specialist in your area. You may not even want to sell the home for sure, but it is best to know how much the home would most likely bring in a sale. This type of specialist can also help you with estate sale information if you need it.
Step 3. (Can be working on at the same time as one and two)
Perfect your title to the property. The home may need to go through probate to sell or transfer title to you, to a relative, or to a third party. Contact an estate attorney to determine the best and fastest way to accomplish this (if the borrower had an attorney that would be a great place to start).
The attorney can advise you of any potential delays or liabilities for transferring title, but you can’t transfer title to anyone else in a sale or otherwise if it is still in the original owner’s name.
Decide if you want to keep the home, give it to a family member, sell it or walk away and let the lender take it back. If you decide you want to keep the home, you will need to pay off the balance of the mortgage or 95% of the current market value if the balance is more than the home is worth. If you decide to sell the home or give it to another family member, having the elder real estate agent ready to go and title in your name will get you going in the right direction.
Talk to your reverse mortgage lender. Once you have all your decisions made and are ready to act, if the lender has not contacted you already, you are ready to contact the lender to tell them your plans. The lender will probably have found out about the passing already. They may have contacted you to let you know the loan is due and payable, but they may not have your information.
If you know what you want to do and can contact them with your plans in place before they even notify you (their contact info will be on the statement), then your plans will not be delayed by them not being ready to act when you are ready to sell or refinance the loan. They have things they must do on their end including appraisals, contacting HUD, etc. and if you are ready to proceed, you can eliminate unnecessary delays.
If all plans point to the fact that the property is not worth enough to sell and you do not want to keep it, get ready to walk away. Be sure to have all your loved one’s belongings removed from the property that you wish to keep. Then the senior real estate professional you consulted in the beginning can probably connect you with an estate sale professional in the home.
These individuals will conduct a sale of all the personal items you did not remove and then donate all remaining items at the end of the sale. Many times, this can help pay some final expenses as well as provide some tax benefits with donations. Be sure to talk to your tax specialist to determine what receipts, etc. you will need to file the final tax returns.